35% Corporate Income Tax Exemption on Joint Venture with GSIS

October 11, 1988 BIR RULING NO. 485-88 20-00-99-00 326-88 485-88 Gentlemen : This refers to your letter dated September 12, 1988 stating that in April, 1988, your company entered into a contract with the Government Service Insurance System (GSIS) based on the following facts: 1. That GSIS, is the owner of a piece of land, having acquired the same through a foreclosure sale. 2. That your company will develop the land, construct housing units thereon, and sell the lots and/or housing units to the general public; but preferably to the GSIS policy holders. 3. That the GSIS shall underwrite the total financing needs of the qualified buyers of the completed units and developed lots. 4. That upon delivery by your company to GSIS of the documents executed by the buyer covering the sale of the lot/housing unit, GSIS shall release to you the price of the lot/housing unit, minus the amount representing the recoupment of the GSIS investment on the land. You now request for a ruling on the taxability of your activity. In reply, please be informed that based on the foregoing facts, you have entered into a joint venture with GSIS; thus, you are neither subject to the contractor's tax prior to December 31, 1987, nor to the value-added tax beginning January 1, 1988. Moreover, said joint venture having been formed for the purpose of undertaking a construction project is not subject to the 35% corporate income tax as contemplated in Section 20(b) in relation to Section 24(a) of the Tax Code. Very truly yours, (SGD.) EUFRACIO D. SANTOS Deputy Commissioner